Allison's Portfolio Has a Beta of 1

question 39

Multiple Choice

Allison's portfolio has a beta of 1.5 and earns a return of 15%. Brianna's portfolio has a beta of 1.0 and earns a return of 11%. The risk-free rate is 3%. According to the Treynor measure,

• A) Allison has the better portfolio.
• B) Brianna has the better portfolio.
• C) the portfolio's are equally desirable.
• D) the answer depends on Allison and Brianna's risk tolerance.

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Definitions:

Control

In a business context, it refers to the process of monitoring activities to ensure they are being accomplished as planned and correcting any significant deviations.

Constraint

A limitation or restriction that influences or hampers the ability to perform an action or achieve a goal.

Copper Furniture

Furniture items made primarily of copper, known for their aesthetic appeal and durability.

Price Increase

The act of raising the cost of goods or services that a company sells.